Higher costs due to BellSouth’s law

The Advocate story, LUS to receive draft of PSC pricing rules, gives background for a set of draft rules the Louisiana Public Service Commission (PSC) is expected to issue this week.

The regulation is a result of language in BellSouth’s misnamed “Local Government Fair Competition” Act (Act 736) passed last summer as a compromise to the original BellSouth bill which would have made Lafayette’s fiber-optic project impossible.

The story, while well-written, tends to be a little confusing in part because of necessary technical language such as “in-lieu-of-taxes” and “cross-subsidizaton,” and in part because the concepts seem a little off. I think I can help clarify the matter by giving a little context. You need to clear your mind of the usual assumption that the PSC exists to ensure fairness for consumers and citizens—to make sure that rates are no higher than they must be. Act 736 is not about that. It is about ensuring “fairness” (cough, cough) for telecom corporations–by which the framers of the law (uh, BellSouth) meant that municipal providers should labor under any burden that they do and a number of burdens that no private corporation would ever tolerate. The purpose of this segment of the law is to artificially raise the cost to consumers and citizens above that which they would have to pay were there no such “fair” law.

Ok, stop for a minute and wrap your head around that. The purpose of this regulation is to ensure that you pay higher rates than you would otherwise. And the PSC is supposed to enforce it (don’t you know they hate this). Once you have this Alice in Wonderland concept firmly fixed in your mind the story makes a lot better sense.

Ready? Good. Let’s jump down the rabbit-hole.

One part of the regulations that we will see in draft form this week is that which results from the Act 736 requirement that the PSC make sure that rates to customers are set higher than the actual cost of LUS doing business. This requirement is supposed to account for taxes and fees that LUS doesn’t have to pay because it is a public body or because it already owns the rights of ways for which the fees are paid. (Honestly. That is really the logic of it.) LUS managed, as part of the compromise, to get its contribution to the city government (in-lieu-of-taxes) counted against this requirement. As it turns out, the in-lieu payment is already greater than all the taxes and fees that private providers have to pay, regardless of what sob stories we often hear from telecom corporations. But still, the PSC has to set up elaborate regulations–and LUS has to spend money to track of all this–so that the PSC can confirm that LUS is not saving its customers too much money.

Now if that isn’t strange enough, in addition to asking LUS to charge you for taxes it doesn’t pay and fees to use property it already owns, Act 736 also requires that the PSC impose conditions on LUS that no private business has to endure. The basic idea is that LUS should have to pretend that the new business is not a part of LUS and charge itself accordingly. Private businesses normally start new divisions and enterprises in areas in which their current resources make them better able to compete efficiently. That’s just common sense. You’d think. But in the world in which Act 736 forces the PSC to exist, it is illegal–for public entities. So there will be a “cost allocation manual” that controls what percentage of the work on a pole is assigned to the telecom division and how much to power. There’ll be “affiliate transactions” regulations that mandate that LUS charge open rate for work folks in the power division or sewer divisions do for LUS. There will be endless red tape to prove that they are doing these inefficient things. To what end? Well, to hear BellSouth tell it, to prevent the evils of “cross-subsidization,” which apparently is a bad thing when a public power company uses its resources to support telecom services but a good thing when a telecom company uses its immense technical resources and broadband backbone to muscle into the wireless business. (Cingular anyone?) “Cross-subsidization” is good, fundamental business practice and an important way in which the free enterprise system develops efficiencies to pass on to consumers and enrich owners. There is absolutely nothing wrong with the idea. Except when the efficiencies are earned by BellSouth’s competitors.

The truth is that the real purpose of these regulations is to force unnecessary inefficiencies and costs onto the telecom division. And the purpose of that is to make sure that LUS cannot bring your rates down as low as it would otherwise be able to do.

So, friends and neighbors, the coming rate hearings are not only an inscrutable bureaucratic nightmare, they will also determine just how much how much savings our utility will be allowed to pass on to us and how much phantom inefficiency it (and no private provider) will have to carry on its books when it comes time to determine the rates the PSC allows it to charge you. We will discover just how much BellSouth’s law will cost the consumers of Lafayette. It’s all more interesting than you think.

Lower utility costs due to telecom division

Blanchard in the Advocate preps us for the fiber portion of tomorrow’s council meeting. It’ll be another “special” (read late) session taking place after the ending of the regular 5:30 meeting at city hall.

As noted in the story, Council to discuss bond issue during special session, the centerpiece of this portion of the meeting will be the acceptance of the R. W. Beck engineering and feasibility report. The city charter requires that such a report be presented to the council and published at least 60 days prior to the projected fiber referendum.

Some of what is in the report is actually very interesting. It focuses on the effect that the telecommunications division of LUS would have on other utilities:

The R.W. Beck report says that the communications system should result in a benefit to LUS as a whole, “resulting in lower rates.”

That’s “primarily” because of the savings expected in overhead costs — because many of the functions of the new communications division are shared by the existing utilities division, the report says.

The report also echoes the earlier study’s conclusion that the revenues from the communications side of the business will be able to pay off all the new debt obligations.

However, the report says that should the revenues of the utilities system be needed to pay off those new bonds, “such exercise will not materially impact the financial condition of the utilities system.”

It makes sense—LUS will have a larger revenue stream to distribute fixed costs, like billing, pole maintenance and the like. All divisions will benefit as the cost of delivering each separate service falls due to increased shared costs.

The better the telecom service does, the more we will save on all our utilities. That should have been obvious. And now that Beck has pointed it out, it is.

“LUS Fiber” – new resource at the Advertiser

The Advertiser posted a great new resource today: an extensive record of fiber stories going back to July of last year. You can get to it at: LUS Fiber.

Now you might have thought that all that information was available on the internet already. Well, it used to be and you might not have noticed the recent change that led to all the Advertiser’s locally produced material going into a for-pay archive after only a week (the Advocate gives you a month). With that change, the recent historical record suddenly vanished from the online world. I thought (and think) that this is a terrible decision both from a community and a business point of view. But it is common enough that it didn’t seem worth complaining about.

The Advertiser clearly would like to be the paper of record on this issue, and opening their archive in this way really helps. If you now want to go back and track the evolving story you can. The local paper’s archive should be a community’s memory. The more easily we can track our own history — the decisions made in the past, and their consequences — the better decisions we can make today. The Advertiser’s making these articles easily available goes a long way toward helping us think more clearly about this issue. If you want to know what Cassard or Huval said in July, you can now find out exactly.


Huval speaks at F2C

Terry Huval spoke at an important national conference March 30th on “The Battle of Lafayette.” He was accompanied by Jim Baller in a session titled “The Fight for Local Freedom to Connect.” F2C, Freedom to Connect was focused on developing effective ways to combat the increasing erosion of our freedoms online. The basic idea was that we should regard the freedom to communicate as a primary right and regard the freedom to connect–to electronic networks–as one of our era’s battlegrounds to maintain those rights.

The F2C conference is one of those events that is designed to affect the way people think about a topic. Every so often a conference will exist at a happy intersection of just the right subject, historical moment, and participants and as a result will become legendary events in the field they cover–or sometimes in the field the discussion creates. F2C aimed to become one of those events and it was sponsored by “technorati” and the roster of speakers and attendees included some of the heaviest hitters in fields ranging from network design, to electronic freedoms, to developing connected communities. That is to say, it is an impressive forum in which to have a major session focused on Lafayette’s battle to determine our own future. This is evidence that Lafayette is “on the radar screen” nationally, evidence almost as potent as USAToday’s endorsement of our project.

I held off posting on this a bit, convinced, considering the type of conference that it was, that eventually someone would post coverage that I could share with readers. Fast Company, the prestigious entrepreneur magazine, has done just that in a summary of the session (they also have summaries of the others as well, a number sound really interesting).

As a bit of lagniappe, I offer you the following photos from flikr that I googled up: Huval speaking, Huval fiddling with the conference musician. Looks like a Cajun fiddler can have a good time even in Washington.

Long story short: this is a very good thing. There are loud ways to have national influence (like the USAToday article) and quiet ways. This is a premier quiet way. It’s nice to see our guys have the bases covered.

Flash! Opposition Stands Down!

[Please note: this was originally posted on April 1st.]

In a surprise move this morning BellSouth, Cox Communications, and representatives of Fiber411 called a press conference to announce that they will not actively oppose the passage of a July 16th vote on a bond issue to fund an LUS/City plan to build a fiber optic network to supply advanced communications services to the doorstep of every home in the city.

The two corporations issued separate press releases and Fiber411 issued three individual statements. The gist seems to be that with virtual unanimity among civic and political organizations in favor of the plan and with the issue holding at a steady 75 to 80% approval rating in a recent series of Kennedy polls, the opponents have decided that a local battle would not be in their long-term best interests.

Quick Clips from the Press Releases.

BellSouth, over the signature of Bill Oliver:

While still confident that this experiment is both unnecessary and unwise, BellSouth recognizes that the people of Lafayette have an absolute right to determine their own future. It is clear that the people of this community, whatever their reasons, have spoken and that to further actively oppose this plan would be counterproductive. As a good corporate citizen we can only hope that Lafayette will prosper as a result of this project and that we, even with reduced profit margins, will enjoy the benefits of new local growth and development…

Cox, over the signature of Gary Cassard:

Cox Communications has always been in favor of fair and healthy competition on a level playing field and we are now confident that state regulatory bodies will correctly interpret the Municipal Fair Competition Act (Act 793) in a way that will allow us to continue to charge a reasonable and fair price by disallowing any attempt by LUS to undercut our prices. Consequently we will not campaign against the plan before the people. We plan an aggressive rollout of new high end pay-for-view and adult channels to preserve our local market share. We have constructed a new website, Let the People View, and urge the people to use its facilities to email letters supporting the people’s “right to view” to their local councilmen…

(While press releases for all three principals of Fiber411 were announced, the ones for Neal Breakfield and Bill Leblanc were nowhere to be found. Tim Supple’s statement is by for the most surprising—and the most heart-felt—of the three available announcements. It is reproduced in full.)

Tim Supple:

Following meetings with members of the Chamber of Commerce and a 20-minute discussion with Doug Menefee on Ray Greens’s show, I have come to realize that my profiber hopes for Lafayette, and the pro-development and pro-progress position I have always taken, can be best realized by supporting LUS and the City of Lafayette in this venture.

I have always been in favor of fiber for the home in Lafayette and remain concerned about the projected cost and the thinness of the publicly-announced business plan. However, it has become increasingly obvious to me that my hopes that a private entity will step in and provide Lafayette with what she needs in the face of more lucrative opportunities in larger communities was misplaced. If we are to have fiber we must do it for ourselves.

Similarly, a key concern of mine has been that LUS provide a system that was open for competition by many providers. What was not clear (and I urge LUS to publicize this point more clearly) is that by pledging to leave IP services open and ports unblocked, the LUS system will be more open to competition from day one than its competitors and will naturally become more and more open as the traditional phone and cable models atrophy. Additionally it is painfully clear upon reflection that no one expects any private provider to open its systems to competition and that supporting a private solution to the ownership of the fiber is to support the establishment of a virtually unbreakable monopoly which would eventually demand offensive levels of regulation. LUS, in contrast, can be locally monitored and controlled to ensure that it provides an avenue for fair competition. I pledge myself to being that watchdog!

For these reasons I urge all our citizens to support LUS and its plan to advance the future of our community.

Honestly: I am stunned and impressed. I never thought I’d see the day.

BellSouth press release
Cox press release
Supple press release

Lafayette Coming Together meeting

Lafayette Coming Together, the local citizens’ group, met again last night. The group is growing and garnering good public and institutional support. All the usual—and diverse—suspects attended, including reps of Lafayette Yes! and the local Democratic and Republican parties. Joey Durel made a welcome surprise appearance and offered congratulations and support.

While coordination issues were important topics again, the group started to buckle down to the real work of organizing: building membership and breaking down the tasks of getting together materials and building committees. As you might expect, it was easy to imagine more work than hands available. From three pages of ideas, loose groups working in areas such as Networking, Visibility, Houseparties, Talking Points, and a Letter Writing Guild formed up. There is a real need for folks to fill the holes. If you can, I urge you to join up; it’s a good group of folks doing a real service to the community while having some of the fun for which Lafayette and Acadiana are famous. (Want an excuse to go to Downtown Alive or the festivals? Visibility. Like Parties? Houseparty!)

If you are interested in helping out write us at StandingUp@LafayetteProFiber.com and we’ll hook you up.

Smart growth

The Advocate runs a story on urban planner Hudnut’s speech on “smart growth” in the Independent’s lecture series. “Smart growth” is about communities’ taking control of their future by deciding what they would like to see their city become and taking an active role in moving in that direction.

So it’s not surprising that Hudnut, amidst praise for local culture and concern about the lack of downtown housing, had praise for Lafayette’s fiber to the home plan. From the story:

“He said he’s impressed by Lafayette’s attempt to embrace ‘what some call the new economy’ — referring to the push by the city-parish government and the Lafayette Utilities System to provide high-speed Internet, telephone and cable television services via fiber-optic lines to homes and businesses in the city.

‘The idea of running fiber out to the houses is a remarkable idea,’ Hudnut said. ‘It’s very visionary.’

Hudnut said wiring the entire city with such broadband capacity is ‘something that would put you on the cutting edge of the new information technologies that will be a driver in the 21st century.'”

It’s always nice when folks who should know recognize the value of what Lafayette is trying to do.